How Long Must I Keep Records for New York State Income Tax?

Generally, individuals must keep records for New York State income tax until the statute of limitations period for that tax return runs out. Typically, that means retaining documentation for at least three years after filing a return, but seven years is usually recommended. However, certain records should be kept for a longer period of time as discussed further below. If you have a tax problem, it’s best to consult a New York tax attorney for advice regarding what records you need and how to present your case to auditors.

What Records Do You Need to Keep for Your New York State Income Tax Return?

You have an obligation to keep records that support what you have claimed on your tax return. Good recordkeeping also benefits you because it protects you in the event of an audit. You have the burden of proof in establishing that your tax return is accurate. The state won’t give you the benefit of the doubt, so you want to make sure you have appropriate evidence if asked for it.

Your records must demonstrate all sources of income, withholding and estimated tax payments, expenses, deductions and credits claimed on your tax return. Examples of documents to retain include your W-2, 1099, 1099-B, 1099-INT, 1098, and similar forms from employers and institutions. In addition, if you are itemizing deductions, you should retain canceled checks, receipts, invoices, mileage logs and other proof to substantiate your deduction.

Be aware that the New York State Tax Department can request other documentation depending on the nature of the tax issue. For example, if the state is challenging your residency for income tax purposes, it may ask for cellphone and E-Z Pass records, appointment calendars, credit card statements and other information. A New York tax lawyer can provide guidance on how to respond to document requests.

Are There Records that Should Be Retained for Longer than Seven Years?

Certain documents should be kept for longer than seven years in some cases. The most common examples are records relating to real property, such as proof of the purchase and sale price, capital improvements, amounts taken for depreciation, etc. You also need documentation of other investments like stocks and bonds that show how much you paid and what you received upon sale. Such records should be kept for the length of the statute of limitations period after they were sold. This is so you can calculate your gain or loss on the sale for tax purposes.

It is also important to note that there is no statute of limitations if you failed to file a return, failed to report federal changes or filed a false or fraudulent return to evade tax. As a result, if you fall within this category, you will need to keep any documents relevant to the year in question indefinitely.

How Should You Retain Your Records?

Most records can be kept as paper, but it is a good idea to convert them to electronic files and have a backup copy saved in the cloud or on a separate hard drive stored in a secure location. This is so you have these documents in case your computer or home is damaged.

What Should You Do If You Are Audited?

If you are audited, gather your records and consult a New York tax attorney for advice. We assist taxpayers with all New York State and IRS tax issues. Contact us for a consultation to learn how we can help.